The massive third-quarter gross domestic product gain was revised higher, to 8.2% from 7.2%, with upward revisions in the sales data that were largely in line with expectations, alongside a big upward bump in business inventories that was bigger than our conservative assumptions, but in line with the big surprises already reported for September retail inventories.
Final sales were revised up to 8.0% from 7.8%, as expected, with most of the upward revision coming from increases in all of the major component figures for third quarter fixed investment that left a hefty 16.7% growth rate.
Both exports and imports received upward revisions, as was also expected, with bumps in both cases for goods as well as services, though the import revisions were slightly bigger than the export revisions, to leave a slightly worse net export figure of "only" a $21.9 billion trade contribution to GDP growth.
Consumption growth was revised slightly lower, as also expected, to a still robust 6.4% growth rate. The biggest revision was in the non-sales component of inventories, which was revised nearly $22 billion higher. This was in line with the monthly inventory data but smaller than we conservatively assumed in constructing our own GDP estimate.
We at MMS International still expect 5.0% GDP growth in the fourth quarter.
Consumer Confidence Rises
November consumer confidence jumped to 91.7 from 81.1, which left the index at the highest level since September of 2002.
While the headline gain in November was larger than expected, it was not that surprising given that the historical relationship between the Michigan sentiment survey and Consumer Confidence favored such upside risk. The strong performance is also not surprising in light of solid fundamentals, which include the ongoing strength in the economy, indications that the labor market has finally turned for the better, and the stock market continuing to hover near year-highs.
As for the components, current conditions surged to 80.1 from 67.0, while expectations increased to 99.4 from 91.5. In addition, one of the more encouraging parts of the report was the "jobs plentiful" subcomponent, which rose to 13.2 from 11.8 and leaves the series at the highest level since January.
Overall, the data is consistent with the view that economic growth remains strong, while the labor market is finally firming. The "jobs plentiful" component also supports further improvement in the upcoming November employment report. Overall, current levels of sentiment are consistent with solid levels of consumption.
From MMS International staff economists